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AirQual Test Corporation provides on-site air quality testing services. The company has provided the following cost...

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Accounting

AirQual Test Corporation provides on-site air quality testingservices. The company has provided the following cost formulas andactual results for the month of February:

Fixed Component
per Month		Variable
Component per Job		Actual Total
for February
Revenue$276$30,370
Technician wages$8,100$7,950
Mobile lab operating expenses$4,600$35$8,640
Office expenses$2,700$3$2,910
Advertising expenses$1,620$1,690
Insurance$2,860$2,860
Miscellaneous expenses$940$2$485

The company uses the number of jobs as its measure of activity.For example, mobile lab operating expenses should be $4,600 plus$35 per job, and the actual mobile lab operating expenses forFebruary were $8,640. The company expected to work 120 jobs inFebruary, but actually worked 124 jobs.

Required:

Prepare a flexible budget performance report showing AirQualTest Corporation’s revenue and spending variances and activityvariances for February. (Indicate the effect of eachvariance by selecting "F" for favorable, "U" for unfavorable, and"None" for no effect (i.e., zero variance). Input all amounts aspositive values.)

Answer & Explanation Solved by verified expert
3.7 Ratings (365 Votes)

Actual Revenue/Spending Variance Flexible Budget Activity Variance Planned Budget
Revenue 30370 3854 U 34224 1104 F 33120
Expenses:
Technical wages 7950 150 F 8100 0 None 8100
Mobile lab operating expenses 8640 300 F 8940 140 U 8800
Office expenses 2910 162 F 3072 12 U 3060
Advertising expenses 1690 70 U 1620 0 None 1620
Insurance 2860 0 None 2860 0 None 2860
Miscellaneous expenses 485 703 F 1188 8 U 1180
Total Expenses 24535 1245 F 25780 160 U 25620
Net income 5835 2609 U 8444 944 F 7500

Calculations:

Flexible Budget Planned Budget
Jobs 124 120
Revenue (124 x $276) 34224 (120 x $276) 33120
Expenes: Fixed Variable Total Fixed Variable Total
Technicial wages 8100 8100 8100 8100
Mobile lab operating expenses 4600 (124 x $35) 8940 4600 (120 x $35) 8800
Office expenses 2700 (124 x $3) 3072 2700 (120 x $3) 3060
Advertising expenses 1620 1620 1620 1620
Insurance 2860 2860 2860 2860
Miscellaneous expenses 940 (124 x $2) 1188 940 (120 x $2) 1180
Total Expenses 25780 25620

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